Central Group, a majority shareholder in the KaDeWe Group GmbH, the operator of luxury department stores in Germany, has issued a statement about the self-administration insolvency proceedings granted to KaDeWe Group GmbH.
During the course of the proceedings, the existing management team led by Michael Peterseim will remain in office and continue to run the business.
All three department stores -- KaDeWe in Berlin, Alsterhaus in Hamburg and Oberpollinger in Munich -- will remain open and operations will continue unchanged.
"KaDeWe's insolvency filing has no impact on the operations, financial stability, or viability of any other company within our European portfolio. The challenges faced by KaDeWe are very specific to this company; they have resulted from unsustainably high rental, above-market rates on the properties it occupies and do not reflect its underlying financial health," said Vittorio Radice, board member of Central Group Europe.
Mr Radice said he hopes the self-administration process will help to secure the best possible outcome for the company and its stakeholders.
"Central Group remains committed to providing full support to KaDeWe and its other European luxury stores to continue offering the best service and experience to customers," he said.
KaDeWe posted sales turnover of more than €728 million (28 billion baht) for its fiscal year ending September 2023. This marked a record high since it was incorporated and a 24% increase compared with before the pandemic.
Radice: No impact on operations
The flourishing business is a reflection of a significant investment to modernise and transform all three stores into world's leading luxury department stores, said Mr Radice.
The business generates satisfactory profit "before rent" when compared to other leading European luxury department stores. But the significant above-market rental burden at all three stores put the operating result into a loss. Coupled with hyperinflation due to the war in Ukraine, the increase in rent is more than 37% compared with 2019, making it impossible for the company to make any profit after rent.
Against this background, the KaDeWe management was forced to apply to the Berlin Charlottenburg district court for insolvency proceedings under self-administration.
The application was granted and Christian Graf Brockdorff was appointed preliminary custodian.
"We have been working hard to resolve the situation but were unable to reach an agreement due to the intransigent position of KaDeWe's landlord. Central Group stands ready to step in and to find a resolution if the landlord is prepared to restructure the level of rents down to a market rate," said Mr Radice.
"The approval for a self-administration process is a positive development which will allow KaDeWe's management team to remain in control of operations as the business restructures the significant above-market rent burden. We are fully committed to supporting the company and its stakeholders in finding the most satisfactory solution within the framework set by German insolvency laws."
The KaDeWe insolvency proceeding is a result of the specific legal framework in Germany, noted the statement. It does not involve nor have any impact on other European stores owned by Central Group, which will continue to conduct their businesses as usual. The investment in The KaDeWe Group is Central Group's private investment, not related to Central Retail and Central Pattana in any way.